Smart Grid:

FERC, public service commissioners discuss smart grid outlook

What do utilities and public service commissions need to expand the reach of the smart grid? During today's E&ETV Event Coverage of a GridWeek 2011 panel, industry experts discuss the economic viability of Smart Grid. They also address cybersecurity issues relating to these new technologies. Participants include Maureen Finnegan Harris, commissioner at the New York Public Service Commission; John Hawkins, manager at the Public Service Company of New Mexico; State Rep. Tom Sloan, Kansas House of Representatives; Christi Tezak, senior research analyst at Baird & Co. Inc.; Elizabeth Flemming, commissioner at the South Carolina Public Service Commission; and John Norris, commissioner at the Federal Energy Regulatory Commission.

Transcript

Christi Tezak: Welcome everybody, thank you so much for making the time to join us today. My name is Christi Tezak. I follow energy and environment policy issues for Robert W. Baird. We are a brokerage company based in Milwaukee, Wisconsin.

And what I do is I attempt to help institutional investors, that would be people who are hopefully doing a good job managing your IRA or your retirement account, and help them understand how legislation, regulation, and politics are impacting the publicly traded companies and bonds that they're buying on your behalf.

So, with any luck, I'm doing my job and keeping all of you out of trouble. It's good to see so many friendly faces, some I haven't seen in a while and so many new faces here at GridWeek and I'm thrilled to be moderating this panel.

So, today we are fortunate enough to be joined by Commissioner Maureen Finnegan Harris from the New York Public Service Commission. And I'm going to stick with names since we did a great job collecting bios and I'd like to concentrate on the information we're delivering this afternoon.

And then to her left is John Hawkins from Public Service Company of New Mexico. We have Mr. Tom Sloan from the Kansas House of Representatives. On my left we have Commissioner Elizabeth Fleming from South Carolina.

And all the way on the end is FERC Commissioner John Norris, please don't tell your boss that, who is also a former state commissioner himself. So he has sat in more than one chair in this industry and, I think, has a very unique perspective on the panel. And before I forget, I would also like to thank Deana Davis of NARUC, who did a fantastic job doing all the hard work so that I look like a total rock star, because I didn't organize this panel, she did. So, I'd like to thank Deana because we could not have done it without her.

OK, so just a few introductory thoughts. I will tell you that, you know, since the 2009 stimulus, the American Recovery and Reinvestment Act, the smart grid area has been a focus for investors and they have struggled to understand it.

And I think that's not unusual to see that, because I think that policymakers, utilities, and consumers are also struggling to understand what it means. It's the joke that it's like Kilroy, you know, it's everywhere, but nobody knows exactly what it looks like.

Or it's like pornography, you know, we all think we know what it is when we see it, but I think that the important thing here is, is that we're still facing a lot of challenges in terms of digesting what we want from the smart grid and how it's going to fit into the infrastructure overall.

But I thought that when we were preparing for this that a good place to start was where NARUC started earlier this summer when they formulated their resolution on smart grid principles. There were 14 of them and I didn't think it was quite the right time or place to go through all of them.

But the thing that I thought was most interesting, given where we are today, is the potential of smart grid investments and how it may fit in overall. And I realize I just skipped my notes, because I've got too much going on in my head.

I'm going to backup before we get into that and I'm going to ask each one of our panelists to share with us a few thoughts about where they see things going now that we're two years after the substantial deployment of those -- the smart grid program. And to get a sense of what they're looking for near-term in terms of their focus and what questions they have answered as we stand on the precipice of moving forward. So I'm going to start -- sorry, I did put you on the end, I'm going to start with Commissioner Maureen.

Maureen Finnegan Harris: Your question, where are we, what do we see going forward now that the stimulus funding has been two years.

Christi Tezak: Yes.

Maureen Finnegan Harris: Well, hi, I'm a Maureen Harris from the New York PSC. I'm one of the co-chairs of the NARUC Smart Grid Working Group and sitting in the audience is Robin Lunt, the associate counsel from NARUC, who actually had to do all the work of that smart grid resolution here.

So a little kudos to Robin for getting that done, some foundational principles for NARUC, which was no easy task, to say the least. In New York we just concluded a proceeding that was a year long on smart grid.

And I think our-the best way to summarize it is to say that we are very interested in looking at the results of these pilot projects now that it has been two years. New York is taking a somewhat cautious approach when it comes to deploying smart meters, because we're looking for some detailed information, the impact metrics, the results of these pilot projects.

Before we spend a lot of money on smart meters, we want to learn from the lessons learned from the various states that have deployed meters, both their successes and their failures.

So I think we're on a wait-and-see approach, not too long, but we're hoping to get that information and analyze it and use it going forward. But we're very interested in making a lot of grid modernization improvements, such as distributed automation and a lot of other great projects that are not related to smart meters. So that's just a quick little summary.

Christi Tezak: Great, and maybe John, you can pick up from there and talk about some of the things you're doing down in New Mexico from the utility perspective.

John Hawkins: Yeah, so I'll give you the utility side I guess. I kind of feel like the fish out of water, the lone utility up here. But what I do for PNM is I'm the manager of our Advanced Technology group and so I'm looking at new technologies and, more importantly, applications of those new technologies and how they can support our strategic objectives.

So, moving along this, I'm trying to solve problems each and every day. And I think I agree here that the -- I heard in a panel yesterday, that only about 40 percent of the ARRA funds have actually hit the streets. So we're going to be waiting on some data probably for some time here.

So one of the things that I might worry about a little bit is sitting and waiting on data where we might have a solid application or a need in the near term that we can't necessarily solve without these technologies and taking a solid business case to the commission and being -- and not being able to get those funds because we're waiting on results.

Tom Sloan: I'm Tom Sloan and I'm a state legislator from Kansas. That's a flyover state. You know, when you're going somewhere on vacation you probably pass over us and wave, yeah, if you haven't fallen asleep. I have a different perspective obviously. I don't regulate.

I don't have a company that I have to make money for, but I can do more to screw up their lives than you can imagine, and usually through ignorance.

And one of the messages on the smart grid is that I think the media has captured the idea of smart grid being smart meters and refrigerators and, you know, hot water heaters talking to the utility company and such.

That creates a rising expectation for the customer and it creates problems for people like me because they don't call the commissioner, they don't call the utility company. They call their elected official and say, "Why can't I? I read this. I should be able to do this. And besides that, why are my rates going up if smart meters are supposed to save me money?"

So, from my perspective, as with Maureen, I see the real value being on the T&D systems, where the utilities are able to address flows and impediments and outage prevention and such and that we try and focus the attention on those aspects which show more immediate results and less on the hyperbole, if you will, of the meters.

Christi Tezak: Hyperbole, no, we never have that in the utility business. Commissioner Flemming?

Elizabeth Flemming: Well, good afternoon everyone. I'm delighted to be here today discussing this very important issue for both utilities and regulators. I wanted to just give a brief synopsis of an energy policy report issued in South Carolina in 2009 that was commissioned by the legislators.

And they did it because they wanted to know where we were now, where we needed to go for a carbon constrained future. And we are fifth in the nation in electric consumption and that's because, well, we've had relatively inexpensive electricity, but we had these terribly hot summers, moderate winters, so most people use electricity for heating and air-conditioning.

What came out of that were several recommendations, conservation, energy efficiency, demand side management, none of which has really been pushed in our state, the opportunities are great, and new generation that is greenhouse gas emission free. So I preface that because two of our major utilities, Duke Energy and Progress Energy both received huge grants from ERA. And because we are in that position, and because the focus has been placed on those things, I think that that's where they are focusing their smart grid activities.

And I think so far, in the limited reports that are coming back, it's just pretty-I think it's pretty amazing. And it will be interesting to see where we go in the future. The interesting thing is though today the Public Service Commission has received no applications for smart grid projects.

We are kind of a different breed of the way things work. So, we will probably have those projects be included in rate cases which are on the horizon soon, so we will know. And I think getting this data and information about the successes and failures is going to be very helpful to us as we move forward in this.

And I think this is a time to seek cooperation among the utilities. That's what we're hearing from them, especially IT departments and with other sectors. And I think it's time for creating operational efficiencies and demand response and energy efficiency successes and for new entrances into the grid, like our electric vehicles.

Christi Tezak: Commissioner Norris.

John Norris: Thanks, I think I'll pick up where Tom made a statement and that was they're going to come to you to complain when their costs go up. The reality of our electric system is costs are going to go up. I mean, we're living off infrastructure that was built in -- that was put in a lot before my life.

The least I can say it's now eligible in AARP, which is okay for us, but it's probably not okay for our electric infrastructure. And the reality is we've been living off that infrastructure investment of decades ago for a long time.

It's now going to need to be retooled and rebuilt, which is the prime time to bring this kind of technology into the picture. And Tom, I mean John, none of your ratepayers I know come to you and tell you that they want to pay more for electricity. In fact, they think it should be less, right?

So we've created this perception all of this technology is going to make electricity less expensive. There's a problem, it's not, it's just going to make it more efficiently priced, hopefully if we do this right. So that's what we're really striving to achieve here.

And I think some of the data, hopefully we'll get sooner rather than later, but understand these projects, nothing in this industry goes fast. We all know that. But the data that we're going to get from the DOE funded projects will be informative towards what is the value we can receive from these investments.

One of my favorite phrases in this space came from NARUC meeting in Sacramento a year and a half ago, which is, "Smart grid will move forward at the speed of value."

And that's what our challenge is, to make sure that we can convey that value and a lot of the value does not necessarily show up in the rates or doesn't mean an expectation that it's going to go into lower rates. So that's our challenge. A lot of its communication, a lot of it's education, but a lot of its coordination to make sure we're doing this, we're deploying these technologies in the most efficient way possible.

And that's what I hope the information we glean from the DOE funded projects, just make us all better about how we -- what projects work, how to tweak them, how to overhaul them to move forward with deploying this new technology now. It needs to start being deployed now as we begin to rebuild and retool this entire electric system that our country is facing having to do in the next several years.

Tom Sloan: I want to follow up quickly on what the commissioner was just saying. You know, I use the term rising expectations on the part of the customers. What we are basically saying here is that while your rates will go up, the reliability of the system will go up too. Customers don't see that.

I know if my lights are on or if they're off. To tell me that I'm going to have a 10 percent reduction in off, is not something I will recognize or measure. And so, again, a lot of the issue that all of us have struggled with is how do you educate in a way that the consumer will hear it? For those of us who have sought elective offices, you know, when will the constituents start to listen?

What media do they listen to? What message is most going to resonate with them? And we have that same issue in terms of smart grid. How do you get their attention? How do you present the information in a way that they're going to retain it? And then how do you keep them from reacting adversely when something goes wrong?

Maureen Finnegan Harris: If I could, I do think that's an interesting point, which is do consumers even know about outage management systems or the restoration of a utility? No, they just want it fixed when they fix it.

So I take the view that the upgrades to the system that are not consumer behavior oriented, the meter, the transmission and distribution upgrades, that's part of the utilities responsibility for the reliability and safety of the system. This may come out wrong, but I don't think that's something that we need to educate the consumers on.

That's part of the delivery of your electricity. I mean to me what we need to empower and educate the consumers on are those benefits that are relying on consumer change and consumer behavior, I mean, trying to distinguish the smart meter from the grid modernization and I think that will go a long way in empowering the consumers.

John Hawkins: And just really to add onto that is a little bit. One of the other things that's interesting to us as utilities is we have to understand we've got multiple types of consumers. In Albuquerque, New Mexico, we have a large Intel plant. They are extremely concerned about any ripple within the power delivery system and they probably see it before we do.

However, a residential, you know, maybe a lower income person, they would gladly give up 5 minutes of sadying if it, you know -- and they don't even know what sady is, for a lower bill every month. So it's a constant balance between those two different types of consumers with different expectations of the system.

Elizabeth Flemming: I agree about the transmission and distribution lines and how that can be greatly enhanced with a smart grid. As far as a consumer goes, I think the important thing there above all else -- I do agree that the PR that was put out there really set up a perception that can't be realized, because the cost electricity will go up.

But it can keep their bill lower than it would be without that. And I think targeting -- but the consumer has to be educated in that regard. So there has to be-the programs that I've heard that have worked the best have been the ones that have been intensely focused on educating the consumer first.

But we all have -- we're an age of being addicted to technology. I mean I left my phone, my cell phone, accidentally in the car. I feel like I'm in -- I was telling them, walking in a wasteland. I felt bare without it.

So, it seems to me that if the customer does become acquainted with it, learns how to deal with it, that it will be an opportunity for them to take advantage. Everybody may not want to, but probably the majority of the people will once they learn the benefits and learn how to do it.

John Norris: Yeah, maybe I would add, Maureen talked about the transmission and one of the things that -- just that -- yes, I know, it's puzzling to me. In FERC's 2009 Smart Grid Policy Statement we talked about the interim rate and the result of that was for us to -- I believe it was PG&E in California, we gave them advanced approval for rate recovery, cost recovery for investment and phase measurement units on a high-voltage transmission line in California.

But I thought that would be the start of people coming to us because now we're saying there's going to be surety of cost recovery to begin to deploy smart grid, not like the traditional view is smart grid in the house, but actually on the transmission system. That's the only case we've had to date, a request to date. So, just an interesting side note.

And then we've also opened an inquiry on our transmission rate incentive policy. And this is exactly the type of thing I think we need to look at. Is there a place for our incentive policy to align with these type of technologies we know are going to be necessary in the future? You don't want to make investments in your infrastructure every five or 10 years.

We know this is long range stuff. And since a lot of this stuff is going to be getting rebuilt, we need to make sure that we are providing incentives and the cost of recovery a surety, of investing in smart grid technology on the transmission level now. And not wishing four or five years from now, doggone it, why didn't we do that?

Christi Tezak: Well, there's nothing more fun when you're the moderator and your last speaker tees up the next place you wanted to go. Deana, wow, they're great! Back to the smart grid principles and the potential of smart grid investments.

I thought since this was one of the first things that was on-it might have been the first thing that was on the list, and the potential for smart grid investments to improve reliability, provide for a more resilient power system, reduce peak demand, provide customers with more detailed information integrate renewable resources, reduce consumption of electricity and it does go on for a little bit longer.

But I wanted to put that out there in the context of something Robin Lunt actually said on her panel yesterday, which was, you know, when companies, in doing business with utility commission, one of the things that seems to have crowded its way onto the front of the desk is these issues of EPA rules and what they may hold for the generation portfolio and how we're going to cope with that.

And that issue has done a lot to elbow smart grid off the front burner, if you will. And I wanted to put Commissioner Norris on the spot real briefly. You had the opportunity to enjoy the company of Congress for some three hours this morning on this topic.

And what I wanted to put out there for our panelists is what are the investments that you think make a meaningful contribution to addressing this issue of the portfolio needing to be changed and these other public policy goals that both federal and state regulators, as well as their legislators have before them and the challenges to the utilities?

And how do you see smart grid fitting into that context? Because it seems to me it's got to elbow its way back into-onto the front burner and get a little of that attention back or, as Robin says, they're done.

John Norris: (Inaudible).

Christi Tezak: Well, not quite done, but definitely not front burner.

John Norris: Actually, it's not like I haven't had the spotlight on me already enough today.

Christi Tezak: It was a softball question.

John Norris: That's OK, I know.

Christi Tezak: You get to talk about them, not you.

John Norris: It was an interesting morning talking about the reliability impacts of the EPA rules. And my contention was we have the tools available, multiple tools available at FERC, at DOE, at EPA, even PRESNA, tools to deal with reliability concerns that arise because of the implementation of the EPA rules.

One of the ways, one of those tools is our regulation of the competitive wholesale market. And that we've learned that there are often -- we rely on market signals to create an efficient transition in this economy, in the electric sector.

There have been tremendous demand side of resources come to the table in the last several years in terms of either energy-based demand and response, but this type of technology even opens up more opportunities.

And so, as we look at addressing reliability concerns with the implementation of these rules, one of the resources that we-I think we'll continue to see grow, we've seen it grow tremendously in for instance PGM's capacity market and other places across the country. That's a-well, the tool to deal with the reliability problem.

And we may have to make market adjustments, rule adjustments if there's specific reliability issues that we need to find a way to deal with. But we can't do any of that without the technology that unleashes the potential to yield a whole new level of demand-side resources, in particularly demand response.

So that's where I see this fitting and it's going to be important that we continue to move the technology and the investment forward so that we can -- it's not just the EPA rules. It's the whole changing of our electric system. We're asking this grid to do more than it was ever dreamed to be designed to do. And so technology is the answer for the flexibility we need on a number of fronts.

Christi Tezak: Anybody else want to chime in? Mr. Sloan?

Tom Sloan: Tom. I want to take that a step farther and focus on the issues of technology. And one of the things that, in my opinion, legislators and commissioners need to be asking the utilities is how are you addressing the interoperability issues and sort of the timeline moving forward and, you know, the vendor competitiveness and all that other stuff.

I mean, the GridWise Architecture Council and SGIC and NIST have all started to talk about that. But from policymakers' perspective, how do we make sure that our utilities are building in their model? Similarly for things like energy storage.

I mean it's not T, D or G, but it serves all of them. So where does that fit in? And so taking the smart grid applications, but expanding to other technological horizons if you will. I mean to me it's part of the role of the commissioners. And the legislators are saying, "Utilities, are you doing enough to look forward?"

John Hawkins: I agree. In New Mexico, PNM is a vertically integrated utility in New Mexico, and so we have generation and transmission and distribution customers. And the EPA rules are pretty onerous for us, particularly at one of our coal-fired plants. And so, you know, nobody wants their rates to go up.

You know, we don't want people's rates to go up. Commissioners don't want people's rates to go up. And so that's going to be a very difficult balance for us, where we have to invest a lot of dollars at the plant. I mean, we can do a lot in smart.

And that can help us down the EPA, but some of these are very prescriptive and we have to go and spend hundreds of millions of dollars in a coal plant. And that will probably elbow out some of the smart grid funds, because, I mean, there's only so many dollars in the pot there. But Tom, I guess, mentioned storage.

That is one of the projects that we do have in New Mexico, is we were fortunate enough to get some ARRA funding and we are doing a storage project combining PV with battery storage. And so it can make that technology, PV, more efficient for us on the grid. It can help smooth out the variability of the PV output, let's say on a cloudy day when the power drops and the battery can make up for that. But the other thing it will also do for us is it will be able to take that energy from 11, 12, one o'clock when the solar efficiency is the best and shift that to five, six, seven o'clock when the grid needs it most.

Christi Tezak: Maureen, you want to jump in?

Maureen Finnegan Harris: I'll just make two comments about taking a holistic, comprehensive approach with the smart grid as Commissioner Norris mentioned, sort of the-I look at it like the gateway. We have these very lofty, renewable portfolio standard goals in New York.

I think it's 30 percent by 2020 and we have a 15 percent reduction in our electricity usage by 2015. These are all very lofty goals. We're throwing billions of dollars at these goals in New York. Well, if we don't deploy smart grid and we don't modernize the grid, it doesn't work as effectively or efficiently.

So we need to look at this, I think, in a holistic approach and modernize the grid, planning with all of our other agencies, whether it's Department of Transportation for electric vehicles, planning with our Department of Environmental Conservation. We just -- there's a lot of piecemealing going on I think and we need to take a more comprehensive approach to energy usage.

Elizabeth Flemming: Well, we don't have any mandates in South Carolina, but we do have aging infrastructure and we do have generation that needs to be replaced or added. And I think it's an opportunity, and I'm sure other states are in that same position.

So it's an opportunity as we add these, to make it a more efficient, a smarter grid so that we can continue to have the reliable energy that we've become accustomed to. But the thing about it also, if we use the smart grid, we may not have to add the extra generation.

It may be a cost-cutting measure. It costs to do smart grid, but it could-using that could also lower the cost of adding new generation. I know Duke Energy talks about their "fifth fuel," which is energy efficiency, and they actually have gotten rates for the avoided cost of that in our state, in North Carolina.

And the grant that Progress Energy put in for Duke, they were doing a virtual green plant with the cost savings from energy efficiency and demand-side management. So I think we need to think in those terms as well.

Christi Tezak: So, now that we've got a sense of what we'd like to achieve on this sort of thing, one of the other things that was in the NARUC resolutions was the encouragement to state regulators when they're considering smart grid investments, that commissions may benefit from data analysis and lessons learned from the early deployments of ERA, through information provided by the technical assistance partners in the DOE funding.

And this was probably the most lively part of our conversation ahead of this panel. And I'd like to give each one of you the opportunity to share with the group what you would like to see in your various roles that would help you do your job better as you look forward and are contemplating either approving the investment, making the investment yourself or supporting the investment politically.

You know, as we go forward and start taking these initial next steps, what do you feel you need to be better equipped to make those decisions?

Maureen Finnegan Harris: I'll take a stab.

Christi Tezak: You better start, you instigated it.

Maureen Finnegan Harris: The results of those pilot projects, I mean looking at the results, whether it's successes or failures and applying it to our situation in New York. What's not going to be helpful is just having the data. The data has got to be analyzed and it's got to be used and applicable in New York. And that, that's going to take a lot of resources and I don't know who's going to be doing that analysis.

So you can have as many results as you want or they can post on smartgrid.gov, is that the website? But unless you have resources to analyze the results of this, these pilots, it's not going to be that useful for the states in all of these pilot projects. So, how do we get the results of this? We need some sort of clearinghouse or some sort of ability as a comprehensive group to analyze this information. And analyze it in such a way that a vertically integrated utility can find it useful in New Mexico with the certain amount of renewables that they have, as opposed to a deregulated utility, a deregulated state New York.

I mean, there's a lot of different variables that go into this and I think it's going to be essential to piece all of this out.

John Hawkins: I'd actually just like to echo exactly what Commissioner Finnegan Harris said. You know, ARRA funds were kind of a blessing and a curse. The blessing is we're going to get a ton of information and a ton of learning out of this.

But the curse is that it's kind of slow in coming and not only slow in coming, but we're going to get pieces of data coming out of this in bits and spurts I believe. And each one of those bits of data is going to be applied in that locale.

It's going to be very different in New Mexico than it is from California, than it would be in South Dakota. And so not only is it the learning that you have to understand from each and every deployment, but it's also how are they different, why are they different, or how are they the same and why are they the same?

And make those -- so that the whole mother level of analysis that's going to make this even more difficult to understand for utilities, for commissioners, regulators and customers quite frankly.

Tom Sloan: Coming at it from the legislative perspective, I mean I look at it and say that commissioners, because they're going to be dealing with the universe of utility issues and utility company, because they've got the same perspective if not outlook and goals, are differentiated from people like myself or governors like legislators to being those proverbial blind people feeling an elephant.

And one feels the trunk and says, ah, an elephant is like a snake. Another feels the side, an elephant is like a wall. Someone, you know, touches the tail and the elephant is like a rope.

And yet, as Commissioner Norris was experiencing this morning, the joys of talking with a bunch of elected officials who probably don't know nearly as much as he does and have their own agendas. Or you look at whether you agree with administrator Lisa Jackson and what she's trying to do or former FERC Commissioner Pat Wood and what he tried to do, they both ran into the experience of not having the political support to move toward their objectives.

And so I guess from my perspective on this whole smart grid thing, on the deployment of new technologies, on trying to educate consumers and others about the inevitability of rising costs, any of the things we touched on, if the utilities and the commissions and the vendors are not talking to people like me and educating me on what is feasible, what timelines are reasonable, what I should be saying to my consumers when they call or more likely e-mail me about rates, you're not going to have the support you need to move your policies and your deployments forward.

Elizabeth Flemming: I'm just sitting here listening. You know, every time we go to a meeting the financial world keeps saying, "We need certainty." And I've been to NARUC meetings and the utility reps have been on the podium saying, "We need certainty on what we're -- the direction it's going for energy policy."

And maybe that's what we're missing, that the word got out the electricity would be cheaper and that was a misperception. Maybe we need to have a little certainty about what these investments should bring and can bring and maybe that would be a better way. And the data, I think, can certainly fill that in. But I think there's got to be a broader goal or statement out there, so the elected officials know what the goal is and the utilities and regulators understand what needs to be done to reach that goal.

John Norris: OK, I lost track of the question in my mind, but ...

Christi Tezak: We were talking about, remember when Maureen started the conversation on the phone about what she wants to see when the data comes out?

John Norris: OK.

Christi Tezak: That we need more than data. We need some information. What are the things that you think would be helpful coming out of the stimulus projects that you think would facilitate folks who either have to improve the investments or carry them out and propose them, you know, that sort of ...

John Norris: Yeah. I --

Christi Tezak: That conversation.

John Norris: You all have done such a great job in engaging me in your answers, that I forgot what the heck the question was.

Maureen Finnegan Harris: I thought you fell asleep with your eyes open, John.

Christi Tezak: He gets a lot of dispensation today. He's had a tough morning.

Maureen Finnegan Harris: We're much kinder in the afternoon than your morning.

John Norris: Good, good. You know, I think I mentioned this before, but here's an example of what would be helpful to us. We had the Notice of Inquiry on our transmission rate incentive policy. So we're looking for, you know, what should we target to?

What type of stuff needs a little extra help to get over the financing hurdle? And the information that could come out of the data from these projects, I think, would have enabled someone to make the case that this is achievable technology and there's a good cost basis for deploying it, but it's riskier.

So it may not -- we don't have a "but for" test for incentive policy, but this is an example I think of the stuff that industry could learn to make the case for something like an incentive rate policy that would enable us to find a way to apply our incentive policy to these new technologies.

Christi Tezak: Great.

Maureen Finnegan Harris: Christi, can I jump in?

Christi Tezak: Sure.

Maureen Finnegan Harris: Well, just to make a pitch, the one other thing that I think as a state we'd love is more money. I mean just --

Christi Tezak: There's no more money in the piggy bank.

Maureen Finnegan Harris: Well, but the issues-but I'm talking about cybersecurity. I mean the states just don't have the resources to address the cybersecurity issues, but yet we're obligated to make sure that the system is safe.

So, as we improve our technology, we're also potentially increasing the risk and we don't have the resources to address these issues. So, I guess I'm always making the pitch to assist the states with resources to address that issue in particular, which I know is near and dear to Lib.

Christi Tezak: Well, I think that conveniently brings us to where I wanted to go next and that is, you know, we're looking at a finite financial environment. It's no secret there's -- you know, we've got a long laundry list of objectives would like to achieve on the pollution control side.

Cybersecurity is a real and pressing issue. I mean it is front and center in Washington as well and not just for this industry. You have a to-do list as a regulator or as a company or as a policy maker.

Where does smart grid fit and would it help you to see data that sort of would compare and contrast what sort of, you know, not risk and reward, but you made an investment, here was the payback for different types of smart grid infrastructure?

I know that there's a lot of conversation about, well, we've had meter deployments and now we have meter deployments. But to me that's just the tip of the iceberg for smart grid. You guys have done a lot of substation automation in New York.

You've been doing storage in Arizona. Maybe share with us sort of with the reality that things are tough and the list is long, what do you think for you bubbles up to the top if you had to pick one? My sugar high from lunch just kicked in, sorry.

John Norris: I guess I could start and I think I already touched on a little bit. I mean, unfortunately we know we have finite dollars and really what's going to bubble up to the top is the EPA requirements, the regulations. And so we have to make sure that we're regulatory compliance, regulatorily compliant. And so I think it's going to happen is that will push smart grid dollars lower down the food chain.

You know, unless we come up with some solid or golden project that just completely screams that it makes sense, but I think we'll still be going to the commission and trying to squeeze more blood out of a turnip I guess. The dollars, I just don't know will be there. So, obviously, our -- I guess the top of our laundry list is compliance.

Tom Sloan: Last Friday or Saturday the New York Times had an article about cybersecurity as it applied to our personal data, banking data, health care data, and such. And if I remember correctly there had been more than 30,000 successful hackings where up to 500 of our individual records had been captured or stolen.

So, I agree that the first priority for policymakers is going to be fighting EPA and then when we lose, you know, authorizing the recovery on the investment. But the second is going to be cybersecurity and it's not related solely to the smart grid applications, it's a larger issues.

And from that standpoint, I think we need more communication between the FCC and DOE and the FERC and between the telecom companies of all stripes and the electric companies and, you know, then to the people like us who supposedly are the policymakers.

Christi Tezak: Do you think that the exposure on the financial side might be a way to sort of legitimize this type of investment for the power sector with consumers that -- oftentimes we draw these correlations between the technology industry or the telecom industry and the electricity industry.

If, you know, worrying about having your banking records stolen is a good reason to spend money on protection, do you think that's sort of the way to piggyback, you know, an investment or the wisdom of making a protective investment in the power sector as well?

Tom Sloan: Well, I mean if I may, I think that what we're going to have is trying to capitalize on the synergies that when the healthcare industry finds a better way or the banking industry finds a better way to secure -- or our universities where there is student and other data, or the electric companies -- I mean that lesson is going to be shared, because the hackers are sharing. So it has to be that those of us on the -- those of you who know something on the defensive line are also sharing.

John Hawkins: I totally agree with that, Tom. It's a good observation, more communication and people to help resolve the cyber question, the more minds working on it the better off we are.

And it is certainly, I think in this process, is working towards development of standards to give guidance and move the cybersecurity issue forward because this does -- I've talked to great things about smart grid and the technology, it opens up whole new set of windows to access-to our system and a reliability problem that we have more labor and accounting for. So then they can bring down an entire interconnect, so it is a big concern.

Elizabeth Flemming: You were talking about -- asked about the priorities and for me it would be a secure, reliable grid. That's got to be the number one priority, which goes to the cybersecurity issue for the security. And that is a major issue and the more interconnected it is, the more vulnerable it is to attack.

And you had asked earlier about how we could work with FERC or in what ways. I feel like that is an area that we definitely would need to be working together on that issue. Those electrons are running whether it's on your side or our side. They're just running along seamlessly and we need to make sure they get to where they go and in a secure manner.

Maureen Finnegan Harris: I guess, well, I would just add, if we're talking about the cybersecurity piece here and communication more cooperation, I think some fine lines should be drawn between jurisdictions.

I mean it's very tough for the states, because who has the jurisdiction on some of these issues? FERC? Is it -- I mean there's a lot of cooks in the kitchen and finding out who the head chef is for the cybersecurity issue I think is very important for the states. So we can all communicate, but who do we communicate with? Who's in charge of this?

John Hawkins: And I guess one of the brighter points I think even for the ARRA funding is as part of that there were hooks into that for cybersecurity plans for each and every single one of those projects.

And working with NIST in some of the work that they're doing on their NIST or the cybersecurity requirements-or not requirements, but guidance that NIST has been putting together. So as we put together our cybersecurity plan for our project, we were referencing that document.

So, I think in the utility industry overall, I think we're doing better than we ever have because we're getting guidance from NIST and where having people like DOE say, hey, you must include this as part of your project. And so I think the bar is being raised and I think we're elevating to that.

Elizabeth Flemming: But I do want to say I think it's great that we have the NIST standards, that they're working on that and it is a checklist, but we can't just become complacent with a checklist.

We've got to-it's a constantly changing animal out there. And commissions, both on the state and federal level, have got to be constantly asking questions and aware of that and moving to the next level.

Christi Tezak: I think that one of the things we talked about when we were on the phone was, you know, the experiences that New York had with its recent automation deployment and maybe you could share with us some thoughts on how that's going.

And you guys have done the storage program in Arizona and when do you think we will see DOE start to pull these disparate experiences together? Is it something we can look to see this fall?

Are we hoping to see it in the spring? You know, it won't be soon enough whenever it comes, but maybe since we're going to wait a little while you could share a little bit with us about what your experiences were.

Maureen Finnegan Harris: Con Edison in New York City has done a tremendous job with its distributed automation system. I mean, the remote monitoring system and-I'm sorry, I had an updated number and I misplaced it earlier this morning of the list of substations and switches that they have in New York. But it is unbelievable when you see this.

Now, it's not as sexy as the smart meters and it's not getting the same attention, but this is really cool for outage management and detection. It is like nothing we've ever seen. We had a horrible blackout in 2006, about two weeks after I joined the commission, in New York City and Long Island City.

So we chose that particular growing area in New York City to do a lot of pilot projects. And you go down and you see what they've done down here and it's really an amazing project.

But for more information on what Con Ed has done, if you're interested, it is on their website and I encourage you to learn more about distributed automation and they actually update their website very frequently and talk about what they've done and it's really cutting edge and there's been a lot of success.

I mean there's definitely some obstacles with the technology and there is some -- I'm sure you can speak to this, but it hasn't been perfect, but it's come a long way in the past year. But the information from the DOE, I mean my understanding and you all might know more about this, but it's going to be trickling in as the results come in.

So I don't think there's one set date where they're going to release it. I think it's being posted as they all trickle in. So just smartgrid.gov and it's going to be a great resource for everyone.

Christi Tezak: And was there an opportunity after Hurricane Irene to be able to point out to customers how power went on faster or any-did that provide an opportunity to test drive the improvements or not?

Maureen Finnegan Harris: Well, yes and no. Con Ed was so prepared for Hurricane Irene and you hardly ever hear a Commissioner up there complimenting utility on its outage restoration, but I will tell you, Con Ed knocked this ball right out of the park on its outage restoration.

They were so quick to restore the customers because they can tell where they're out. They can tell the size of their outage.

They can tell where the source is. They know how to look at the transformers, which ones are down, instantaneously now as opposed to doing a drive-by. So, it's really-New York city residents didn't call us, which is a big, big change.

Christi Tezak: So there is progress. Success story number one. Everybody in the press get that one? John, you wanted to say something?

John Norris: Yes, so again I'm going to agree with Commissioner Finnegan Harris. We're required as part of the funding to submit quarterly and periodic reports, both on technical build metrics, all of that is trickling in.

So, yeah, it's not going to be you're going to go at the end of three years and download one big report and there's what you have. But with all the trickling in of information, it's going to be more arduous to actually go in, download the report, make sense of it, and see how it changes over time.

Because, in particular, we have a demonstration grant, so it's a little different than the investment grants, which is just going out and putting known technology in and seeing how it all works.

This is more science-y I guess and trying to really learn a lot out of the project on something that was a little less proven at the outset.

So, information is going to trickle into smartgrid.gov. You know, anybody could go out and take a look at those, but it's going to take some work to be able to put all the pieces together over time.

[End of Audio]

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